The credit rating agency Moody’s has maintained, against market forecasts, France’s sovereign debt rating at Aa3, but has changed its outlook to negative. In this way, Moody’s is the only one of the three large rating agencies that maintains the French country with a double A, the level that marks that a country’s debt is considered high grade. Fitch and, at a time of high political instability in France, with a prime minister hanging by a thread before the balancing act he has to do due to the difficult French parliamentary arithmetic.
In fact, France may face in the short term a new motion of censure that will once again overthrow the Prime Minister, Sébastien Lecornu – one day after announcing the formation of his Government, and on October 10 -, after the French socialist party threatened to overthrow the Executive if a tax increase, especially on the richest, of between 15,000 and 20,000 million for the 2026 budget is not announced, to help balance the accounts.
“If until next Monday, there is no clear change in the text, there will be no room for maneuver in the budget bill or in the social security bill, so, in reality, everything would be lost,” said the leader of the socialist party, Olivier Faure on the BFM television network this Friday. If Lecornu falls, the country would probably be forced to call new legislative elections, dragging France into even greater instability with the effect that this has on the markets.
Earlier this week, S&P’s unexpected downgrade of French sovereign debt, from AA- to A+, revived pressure on the neighboring country’s risk premium, which still remains far from the levels it marked with Lecornu’s resignation at the beginning of the month. France has already lost its double A rating in the three main rating agencies, something that may influence some funds with particularly strict investment criteria.
The situation contrasts with the good moment that Spain is experiencing, which due to the strength and “resilience” of its economy. The Organization for Economic Cooperation and Development (OECD) predicted that Spain will close this year with a GDP increase of 2.6% and 2% by 2026, while France will grow 0.6% this year and 0.9% the next. Days later, the British newspaper Financial Times He placed Spain in his editorial, a continent where the majority of countries show “disappointing performance.”
